NEW HAVEN, Conn.-Pirelli Armstrong Tire Corp. has exited the North American farm tire market with the July 16 sale of its Des Moines, Iowa, plant to Titan Tire Corp., a division of Titan Wheel International Inc. Pirelli Armstrong said the sale, for an undisclosed price, will allow it to focus on its passenger and light truck tire business. The company said the Armstrong-brand bias-ply farm tires produced at the Des Moines plant were out of step with the trend toward radialization in the market.
Pirelli produces radial farm tires in Europe, but there are no plans to export them in quantity to the U.S., a PATC spokesman said.
Titan Wheel International, a Quincy, Ill.-based manufacturer and distributor of wheel assemblies, which last year bought Dico Tire Inc., acquired the assets of the plant as well as the United Rubber Workers strike there.
Union employees at all three PATC facilities walked off their jobs July 15, a couple of days after the financially strapped tire maker announced it planned to sell the Des Moines plant as part of its restructuring plan.
Harry Millis, an analyst with Fundamental Research Inc. in Cleveland, said he's somewhat puzzled by PATC's decision to exit the U.S. farm tire market-``the only area where they have a significant market share.''
``I've yet to see a company survive in the North American market when it starts shrinking capacity,'' Mr. Millis said.
The farm tire market has helped carry along PATC's light truck segment, Mr. Millis said, and ``also was part of the reason for what strength they had in independent distribution....To me, they're selling a very important part of the store.''
Pirelli Armstrong holds 6-7 percent of the light truck and 4-5 percent of the passenger tire market, Mr. Millis added.
Officials from competitors Goodyear and Bridgestone/Firestone Inc. said their firms weren't in line to buy the plant and appeared surprised by its sale.
Goodyear leads the rear farm tractor tire segment in market share, with about one-third of the replacement market and half the OE field, according to industry observers. Firestone follows with nearly the same replacement share and 25 percent of OE sales. Pirelli Armstrong ranked third, with an estimated 20-percent share in each segment.
Faced with the need for significant capital expenditures at the plant, Mr. Millis concluded PATC didn't ``want to put much money into the (farm tire) business.''
In fact, part of the announced ``final phase'' of PATC's restructuring project that was launched in 1992, includes a $100 million capital infusion from its Italian parent company, Pirelli S.p.A., earmarked for various production and product development upgrades during the next two to three years. PATC also will eliminate health-care coverage for current and future retirees that will save the firm $30 million annually.
Pirelli Armstrong said the moves will enable it to break even by 1995. Pirelli's North American unit showed an operating loss of $19 million last year on sales of $510.3 million.
Analyst Mr. Millis is skeptical of Pirelli Armstrong's restructuring plan. ``I don't think they can reduce their position in the market and have long-term survival,'' he said. ``They're either going to have to put a major investment in North America in the next five to 10 years, or sell or perhaps enter a joint venture.''
Meanwhile, Titan Tire President and CEO Maurice Taylor indicated that ``with the appropriate efforts'' the Des Moines plant is capable of doubling its current annual sales volume of $170 million.
However, he added that the company has ``not committed itself to keeping the facility operating as it currently does if it means the business will lose money.''
Titan has built a reputation for buying troubled companies involved in the wheel and tire industry. Its goal is to become a world-class manufacturer, able to compete with foreign tire makers. Titan Tire plans to concentrate future efforts on manufacturing specialty tires that will complement the company's farm and construction specialty wheels.
Titan operates more than 20 locations that manufacture and distribute tire and wheel assemblies and related products. It garnered $6.36 million in earnings on sales of $150.4 million last year.
The company has not clarified its plans for the Des Moines plant or what lines it will produce. Its first priority, according to a spokeswoman, is to resolve the workers' strike.
The supply status of Armstrong farm tires seems uncertain for the moment. Jerry Bauer of Bauer Built Inc. in Durand, Wis., said his dealership will ``wait and see what happens at the facility'' before deciding how to fill its inventory void.
Marty Whitford of Crain News Service contributed to this report.